Enghouse Systems Ltd 2

What stock to review next? See comments blog.

I do not own Enghouse System stock (TSX-ESL). This stock was also recommended by Keystone as a good Small Cap stock with dividends in 2011.

The insiders trading report shows minimum of insider buying and minimum of insider selling with net insider selling. There are a lot of stock options outstanding and everyone has lots of stock options. Between the CEO and a director, they have some 32% of the outstanding stocks of this company. There are some 16 institutions that hold 34% of the shares of this company. Over the past 3 months they have sold about 4% of their shares. However, over the period there have been 2 new institutional buyers.

The above shows rather mixed result and so do not tell us much. If you look at history of 12 months stock prices and estimates for 2012 and 2013, they have been on the rise lately. The 2nd quarterly results of April 30, 2012 have just been released. They show slightly worse debt ratios. However, these ratios are still in the excellent category. Book Value is up a bit. See G&M article. Second quarter earnings were slightly less than the estimates.

The 5 year median low and high Price/Earnings Ratios are 17.25 and 28.52. The current P/E ratio is 17.74 and therefore shows a good current price of $12.95.

I get a current Graham price of $9.67. The current P/GP ratio is 1.33. The low, median and high 5 year P/GP ratios are 1.04, 1.21 and 1.54. This shows a current stock price that is relatively higher than the median. Stock is not overpriced, just higher than the median.

The 10 year median Price/Book Value Ratio is 1.80 and the current P/B Ratio is 2.23. That means that the current ratio is some 24% higher than the 10 year median and is showing a relatively high stock price.

The 4 year median dividend yield is 1.92% and the current dividend yield is 2%. The current yield on a stock price of $12.95 is slightly higher, 4.8%, than the median dividend yield and shows a reasonable stock price.

When I look analysts’ recommendations, I find Strong Buy, and Buy. The consensus recommendation would be a Buy. There are few analysts following this stock.

A number of small cap growth funds have this stock. Such funds as Castlerock CDN Growth Companies has 3% of their funds in this stock; Mackenzie Saxon Small Cap-SI have some 3.14% of their funds in this stock and IAP Ecflx Fidelity Canadian Opportunities has some 3.34% of their funds in this stock. (For the last fund, see PDF document.)

One analyst said that this stock is a high risk, but thought the 12 months stock price would be $17 which means a total return of some 31%. He also complains about poor share liquidity. This stock has been reviewed by CanTech and by Byron Berry of Byron Capital in a February 2011 article in CanTech.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse. See my spreadsheet at esl.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.